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Published: Monday, 1/7/2013

Toledo-area firms' stocks defied uncertainty

Share prices rose for 15 of 17 companies in 2012

BY JON CHAVEZ
BLADE BUSINESS WRITER

Despite a year of bad news and uncertainty, stocks of Toledo-area public companies bounced back mightily in 2012 from their poor showing a year earlier.

After a 2011 in which declining share prices dominated and gainers mostly had tepid performances, the 17 publicly-traded companies of northwest Ohio and southeast Michigan boasted an average share price increase of 41.5 percent.

In all, 15 of the 17 companies saw their share prices increase over the year — a turnaround from 2011 in which just seven of the companies posted gains.

In 2011 the biggest gainer was Cedar Fair L.P., whose share price rose 48 percent. Last year six firms had share price gains of 51 percent or better.

The biggest gainer was Rurban Financial Corp., of Defiance, the parent firm of the State Bank & Trust. Its share price was up 147.5 percent for the year, closing at $6.51 a share on Dec. 31. The other five area firms with exceptional share price increases were Monroe Bank & Trust Co., up 111.6 percent; Marathon Petroleum Corp., up 89.2 percent; Cooper Tire & Rubber Co., up 81 percent; Cedar Fair, up 55.6 percent, and Libbey Inc., up 51.9 percent.

An investor who bought one share of each of the 17 firms on Jan. 1, 2012 would have paid a total of $344.97 but they would have made $92.76 on that investment at year’s end.

The 41.5 percent average increase in share price of the area’s public companies easily outdistanced gains by the Dow Jones Industrial Average, up 7 percent; the Standard & Poors 500 Index, up 13.4 percent, and the Nasdaq Index, up 15.9 percent.

The only two companies whose stock dipped over the year were Maumee agribusiness The Andersons Inc., whose shares finished down 1.7 percent, and Toledo-based wastewater treatment technology firm N-Viro International Corp., which was down 17.9 percent.

The share price of The Andersons, which derives much of its revenues from grain storage and sales, was hurt by the intense drought in 2012, while N-Viro, who shares are traded over the counter, is lightly traded and subject to large swings in its share price.

Matt Faltys, vice president and director of portfolio management for Fifth Third Bank, said the share price gains made by area companies wasn’t surprising, given that the markets as a whole boasted strong gains.

What is surprising, he added, is that the gains happened at all.

“I don’t think there was a credible source in 2012 who could see the market, across the board, doing what it did,” Mr. Faltys said. “I would view 2012 as a gift.”

“I don’t think it was a fluke, but there wasn’t the positive investment sentiment out there that would lead us to expect double-digit returns,” Mr. Faltys added.

No reasonable investor, the portfolio director said, could have foreseen the Dow, S&P 500, Nasdaq, Russell Index, or Emerging Markets indices would all have strong showings in light of how sluggish the markets were in 2011 and considering the market-dampening events and situations that developed in 2012.

Fiscal crises and austerity measures in Greece, ongoing financial problems in Spain and Italy, two major market sell-offs in June and in November, the prolonged drought in the United States, and a hotly-contested U.S. presidential election all provided enough uncertainty to quell investor enthusiasm in most years.

Yet despite those events, “If you stayed in the market, you did well,” Mr. Faltys said. “And the gains were broadly diversified.”

Only the utilities and energy sectors showed slow growth last year, up 0.5 percent and 2.4 percent, respectively, Mr. Faltys said.

At Rurban Financial, president Mark Klein said the bank holding company’s 2012 performance, highlighted by a $3.88 cents per share gain, achieved a company goal set at the beginning of 2012. “I wanted to be the number one [gainer],” Mr. Klein said. “We knew we had significant potential, given our book value, and we knew we had good upside.”

Because the company is lightly traded on the Nasdaq Global Market — its average daily trading volume is about 9,100 shares — its share price can be easily buffeted positively or negatively by stock sales or buys.

With that caveat in mind, Mr. Klein said the company’s aim in 2012 was to create confidence in a strong performance so that owners of its shares “didn’t want to jump ship, per se.”

Rurban aggressively set out to pare down its portfolio of troubled assets, with its provisions from loan losses reduced to $2 million at the start of 2012 from $10.6 million at the start of 2011. Additionally, it pursued quality home loans in 2012, raising its nine-month profits to $3.3 million, up from $1.4 million in 2011.

Rurban also moved forward in 2012 after a loss of $15.6 million in 2010 stemming from its failed attempt to spin off its Rurbanc Data Services Inc. The problem with the data services firm’s software, which had glitches, was resolved in 2011, allowing Rurban to capitalize on opportunities related to financial item processing.

“We had some loan losses in ’10 and the failed attempt to spin off our technology company put us at a sub-value level,” Mr. Klein said. “ But many [investors] realized that there was real value there with us. We had good cash flow and we never issued any common stock in order to do any [stock] dilution,” he said.

“We cleaned up our balance sheet in terms of asset quality and in our peer group, which is about 75 banks, we are in the top 10 percentile. That’s one of the primary reasons for our significant profitability,” he said.

Monroe Bank & Trust had struggled for several years with a portfolio filled with mortgages due to Monroe, Mich.'s struggling economy. In 2010 it operated under a consent order from the Federal Deposit Insurance Corporation and the Michigan Office of Financial and Insurance Regulation, which directed the bank to improve its financial condition But the company appeared to have turned the corner in 2012 with positive earnings in the first three quarters (fourth quarter results will be reported next month) and a $1.4 million profit in the third quarter that doubled what the bank earned in the third quarter of 2011.

Investors responded to the positive results with the bank’s share price making a steady climb all year to close at $2.37 a share.

Marathon Petroleum, however, probably had the best showing of all area companies in 2012.

The Findlay-based company, which is involved in oil refining and the sale of refined products, had an excellent year with its share price nearly doubling and ending the year at $63 a share.

In statements to analysts and in Securities and Exchange Commission filings, Marathon Petroleum’s executives credited several moves that helped put the company in favorable positions with investors.

First, it authorized a $2 billion share repurchase program and then promptly began an $850 million accelerated share buyback program in February to increase the value of its shares. In November, it launched a second share buyback program of $500 million.

Investors also were pleased by the company’s decision to increase its dividend by 40 percent in July, the second such dividend increase since Marathon Petroleum was spun off in July, 2011, by parent firm Marathon Oil Co. of Houston. All told, the Findlay company has increased its dividend by 75 percent since 2011.

From an operations standpoint, Marathon Petroleum managed to complete in 2012 its $2.2 billion heavy oil upgrade project at its Detroit refinery, coming in on time and on budget. The project allowed the company to process heavier crude oil at its Detroit refinery, thereby giving it the opportunity to lower our crude oil cost and take advantage of diverging crude oil prices that emerged over the last two years with increased heavy crude oil supplies from Canada.

The company also has had some good fortune by owning refineries that are located in the Midwest and along the Gulf Coast, two geographically advantageous locations that are allowing it to capitalize on growing domestic crude oil supplies coming out of West Texas and the Dakotas. In late 2012 the company added to those strategic refinery assets by acquiring BP’s refinery in Texas City, Texas, one of the country’s largest refineries.

Perhaps the biggest positive step the company took was in October when it successfully launched a master limited partnership, MPLX LP, which reorganized Marathon Petroleum’s extensive pipeline transmission network into a separate subsidiary. The move, which had been sought by Wall Street, was well received by investors.

MPLX stock opened at $25.50 on Oct. 26 and closed at $31.19 on Dec. 31, an increase of 22 percent in just over two months. 

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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